AROUND 290,000 Tesco Bank current account customers will see the interest they earn on savings slashed, while new users will also be hit.
From June 14, the rate Tesco Bank pays existing current account customers will be cut from 3 per cent to 1 per cent.
Alamy Tesco Bank is slashing its current account interest rate from 3 per cent to 1 per cent
New customers taking out the account will see the same rate cut from tomorrow (March 1).
The move will be a blow to savvy savers who played the system by opening two accounts each to make the most of the competitive interest rate.
Currently, savers earn 3 per cent interest on balances up to £3,000 if they pay in at least £750 a month and have at least three direct debits set up to go out every month.
These requirements won’t change, you’ll just earn less for your money, so you may want to consider switching to a higher paying account – see the box out below.
Top paying current accountsThese will be the top free current accounts for interest when Tesco Bank’s rate drops:
5 per cent from TSB ClassicPlus: Available on balances up to £1,500 if you register for online banking and paperless statements and correspondence. You’ll also need to pay in at least £500 a month.
5 per cent from Nationwide FlexDirect: This is available on balances up to £2,500 but only for the first 12 months. After this, the rate drops to 1 per cent. You’ll need to pay in at least £1,000 each month.
1.5 per cent from Bank of Scotland Vantage. Available on balances up to £5,000 if you pay in at least £1,000 a month, have two direct debit a month going out, and stay in credit.
1.5 per cent from Club Lloyds. This is on balances of up to £5,000 if you pay in at least £1,500 a month and have two direct debits going out each month. Be aware that you’ll be charged £3 a month if you don’t meet the minimum pay-in.
Tesco’s new 1 per cent interest rate can be beaten by most of the interest-paying current accounts on the market, some of which pay up to 5 per cent.
It can also now be beaten by the top easy-access savings account that pays 2.51 per cent, and even the top easy-access Cash Isa, which is offered by Tesco Bank, delivers higher returns at 1.44 per cent.
Tesco Bank says it only ever committed to offering the 3 per cent rate for two years from April 2017.
A Tesco Bank spokesperson said: “In April 2017, we made a two year commitment to guarantee the interest rate customers receive to provide certainty as rates were reducing in the market.
“As the end of that commitment approaches, we have written to customers informing them their interest rate will change on 14 June.”
Alamy Tesco Bank customers may want to consider switching bank to earn more interest
But the supermarket adds that shoppers will still be able to earn two Clubcard points for every £1 spent in Tesco compared to the usual one point.
Each Clubcard point is worth 1p and you need to collect 150 points – £1.50 worth – before you can receive Clubcard vouchers.
These vouchers can then be spent in store at Tesco or tripled in value to spend at Clubcard partners, which include Cineworld, Pizza Express and the RAC.
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Here’s how Tesco Clubcard users can boost their points by 25 per cent with the supermarket’s free app.
Plus, we’ve put together six ways to boost your Tesco Clubcard points.
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